Governance Over Critical Data Elements
10 industry examples that quantify its value
Data governance programs need strong executive sponsorship to ensure cross-organizational support for treating data as an enterprise asset. These programs need continued investment in the form of data stewards, senior management time, and software tools. As a result, data governance leaders must focus on quantifying the financial value of their programs. Simultaneously, data governance programs should focus on a small subset of critical data elements that maximize business value. These 10 examples demonstrate the value of governance for critical data elements across a wide range of industries.
- COLLATERAL_VALUE in retail bankingThe data governance team at a retail bank profiled the columns in its collateral database. It found that a number of secured loans actually had null values in the COLLATERAL_VALUE field. For example, the bank might have approved a loan for $10,000 against an automobile with a resale value of $20,000. However, due to clerical errors, the value of the collateral was never entered into the COLLATERAL_VALUE field. As a result, the bank had to consider the loan to be unsecured, which meant that it had to assign a higher level of Basel II capital than if the loan were fully secured. Once the data governance program identified the list of loans with data-quality issues, it engaged the operations team to enter the correct value of the collateral. As a result, the bank reduced its Basel II regulatory capital associated with those loans.
- Policy expiration dates in insuranceThe data governance team at an insurance carrier conducted a data profiling exercise and found a number of active policies with past expiration dates. It turned out that the insurer had defaulted to a “no-delete” policy and had automobile policies in its database that were decades old. The policy administration department then instituted a program to delete old policies, which resulted in substantial savings in storage costs and an improvement in application performance.
- Ship-to addresses in life sciences A medical device manufacturer implemented a data governance program focused solely on the ship-to information for its business customers. The company’s customers had been experiencing delayed shipments, as products would bounce from one department to another before they reached the correct destination. The company deployed data stewards within the commercial (sales) organization to improve the quality of the ship-to addresses. The company soon experienced improved customer satisfaction as equipment began arriving at the correct destination faster. In addition, the finance department noticed an uptick in revenues from after-sale consumables as customers began to deploy the equipment earlier.
- Email address and phone number at a software company A large software company had thousands of customers and business partners in dozens of countries. After a team of data stewards within the customer management group improved the quality of customer email addresses and phone numbers, the company significantly increased the rate of renewals of its software subscriptions, which had a direct positive effect on the bottom line.
- Customer billing addresses in utilities The customer service department at a large North American utility saved $20,000 a day by implementing a data stewardship program around ZIP+4 information for US postal codes, which resulted in higher discounts from the US Postal Service. The billing department also received payments faster and the utility dramatically reduced complaints that resulted from sending a bill to the wrong customer.
- Vendor payment terms in retail The purchasing department at a large retailer substantially improved cash flow by changing its governance over vendor information. The retailer had already implemented a single database for vendor records, but it was for structured data only. However, vendor contracts resided in a separate repository that was not linked to the associated vendor records. The purchasing department linked each vendor record to its associated master agreement and other contracts. As a result, the purchasing department had easy access to all the agreements for a given vendor, which facilitated day-to-day operations and contract negotiations. In addition, the accounts payable department improved cash flows by standardizing contracts around the most favorable terms and conditions from a given vendor. For example, there were multiple contracts with the same vendor, with some contacts having Net 30 payment terms and other contracts having Net 60 payment terms. Because of improved visibility into all the contracts with that vendor, purchasing could standardize all the contracts on Net 60 payment terms.
- Full-Time Equivalents (FTEs) in government Due to severe budgetary constraints, the governor of a province had committed to the legislature that he would cap the total headcount of government employees at 150,000. As far as the provincial government was concerned, the term “employee” could include full-time, part-time, and contingent employees, and there were at least three ways to calculate FTEs. The business intelligence team had to ensure that the governor used the correct definition of FTEs in his reports to the legislature, since using the wrong calculation of FTEs could potentially embarrass him.
- Standard Industry Classification (SIC) codes in manufacturing The supply chain organization at a large manufacturer used SIC codes for customers as a critical input to demand forecasts. The company would apply macro-level adjustments to the overall forecast by industry. For example, when oil prices were skyrocketing a few years ago, they increased their demand forecast for the energy industry, and applied a “haircut” to the one for the automotive industry. However, the supply chain organization had poor-quality SIC data for its business customers. The customer data stewards used third-party data to validate and improve the SIC codes within the customer records, enabling the supply chain function to develop a heightened sense of trust in demand planning.
- Product hierarchies in telecommunications A telecommunications operator had more than 20,000 SKUs across multiple legacy product catalogs. These catalogs referred to the same product in different ways and had inconsistent hierarchies. The operator decided to implement a new enterprise catalog with only 500 products that accounted for 99 percent of its revenue. With the new catalog, product management reduces the time to introduce new products by 70 percent, which increased revenues for the associated products by 3 to 4 percent. Finally, the operator shaved four weeks from the training time on the simplified product catalog for new customer service representatives—an important saving because the average tenure of a customer service representative was only 12 months.
- Standardized business definitions in any industry Every organization needs to identify a small subset of business terms that have inconsistent definitions. These business terms may include “net sales” in retail, “exposure” in banking, “average revenue per user” in telecommunications, and “customer” in most industries. The data governance team should put together a business case based on anticipated reduction in the time spent by business analysts, data modelers, developers, and business users in searching for business definitions.
Data governance practitioners can maximize success by focusing their efforts on a small subset of critical data elements and linking their initiatives to financial value. Funny things happen once these programs take hold and begin to show success: executives stay engaged, business users come to meetings, data stewards spend more time on data governance tasks and the CFO becomes a sponsor.